THIS RESEARCH traced the development of grammatical sensitivity (both semantic and syntactic) across Grades 1, 2, and 3 on a variety of oral-language tasks and related this development to the acquisition of skill in reading, as reflected by a range of reading measures. The results provide clear evidence for the development of grammatical sensitivity across the three grades, and grammatical sensitivity (with general cognitive ability and vocabulary level controlled) was found to be significantly related to level of reading skill. The findings are interpreted within the context of interactive-compensatory processes in reading fluency and stages of reading acquisition.